How to become a crorepati via SIP

In the early 2000s, every Indian household would be glued to their television sets at 9 PM, with Mr. Amitabh Bachchan on the screen and the iconic sound of the opening theme playing in the background. Mr. Bachchan began the show by asking a simple question “Kaun Banega Crorepati”. For most of us, it wasn’t just a game show but, a dream of becoming a crorepati overnight. Many even imagined answering the series of questions correctly and winning a life changing sum of money.

Back then, the path to wealth generation seemed challenging. Success in KBC had more to do with IQ than EQ. Participants had to showcase their knowledge and prompt thinking under spotlight. The ones preparing for competitive exams like the UPSC, stood a great chance of making it. However for most, the main challenge was getting a call through to broadcasters.

Apart from KBC, the options of becoming a crorepati seemed limited. Either rely on luck by winning a lottery or follow the traditional path of working tirelessly throughout the life. However, twenty years hence the landscape of wealth creation in India has undergone a considerable transformation.

Today, with the evolution of technology and the accessibility to financial markets, the avenues of becoming a crorepati have become significant. While becoming a crorepati via KBC still continues to be a dream, the rise of mutual funds and systematic investment plans (SIPs) has provided ordinary individuals with a realistic path to wealth accumulation.

Investing in mutual funds offers a more systematic approach to wealth creation. With SIPs, investors can start small, invest regularly and benefit from the power of compounding over time. The disciplined approach of investing regularly, irrespective of market volatility, reduces risks and enhances the potential for long-term wealth creation.

An individual who believes that he/she can invest on his/her own can begin SIPs via apps like Paytm, Groww etc in the direct plans. However for individuals who require assistance, constant support, guidance on portfolio rebalancing as well as financial education can take help from a financial advisor.

Personally, most prospects whom I on-board as clients, aren’t sure of the goals they want to plan for. But after lot of deliberation, the first thing that crosses their mind is accumulating a corpus of Rs. 1 Crore. However how much monthly SIP required for the corpus is always a big question mark for them.

Let us understand with the help of 3 scenarios as to how much SIP per month is required to accumulate the corpus of Rs. 1 Crore.

Scenario 1:

Assuming that an Individual has 10 Years to reach this goal of accumulating the desired corpus and he/she invests in a mutual fund scheme with an expected return @ 10% p.a., a monthly SIP of Rs. 48,400 (approx.) would be required to achieve this target. Similarly if the expected return of the scheme is 12% p.a. or 15% p.a., the monthly SIP amount will be Rs. 43,000 (approx.) & Rs. 36,000 (approx.) respectively.

Scenario 2:

Assuming that an Individual has 15 Years to reach this goal of accumulating the desired corpus and he/she invests in a mutual fund scheme with an expected return @ 10% p.a., a monthly SIP of Rs. 24,000 (approx.) would be required to achieve this target. Similarly if the expected return of the scheme is 12%p.a. or 15%p.a., the monthly SIP amount will be Rs. 19,900 (approx.) & Rs. 14,800 (approx.) respectively.

Scenario 3:

Assuming that an Individual has 20 Years to reach this goal of accumulating the desired corpus and he/she invests in a mutual fund scheme with an expected return @ 10% p.a. , a monthly SIP of Rs. 13,000 (approx.) would be required to achieve this target. Similarly if the expected return of the scheme is 12% or 15%, the monthly SIP amount will be Rs. 10,000 (approx.) & Rs. 6,600 (approx.) respectively.

The above scenarios have been summarised by table below:

(Assuming that an investor invests at the beginning of the month)

A few steps mentioned below indicate how you can proceed with SIPs:

1. Select an Asset Management Company (AMC): There are many AMCs in India, so you must select one that you can bank on. AMCs can be compared on basis of fees, performance, and investment philosophy etc.
2. Choose a mutual fund scheme. There are more than 4000 schemes available for investment. However, one should select an appropriate scheme based on performance, risk appetite, goals, horizon etc.
3. Finalise the SIP amount: One can start a SIP with an amount as low as Rs. 500 per month. The SIP amount should depend on the financial goals and budget.
4. Setting up a SIP: Once you have chosen the mutual fund scheme and decided on the SIP amount, you need to set up a SIP. You can do this online or via a distributor.

An Individual can involve a Financial Advisor to get assistance while investing.

Some important points to remember when investing in SIP:

• Invest for the long term as power of compounding works over longer period of time. Don’t invest for quick returns or getting rich fast.
• Choose the right mutual fund scheme: The performance of your SIP will depend on the performance of the mutual fund scheme you choose. Do your research and choose a scheme that has a good track record.
• Stay invested during market volatility: The stock market is volatile, and the value of your SIP will go up and down. However, if you stay invested for the long term, you are likely to see good returns.

• Invest for a goal: What do you want to achieve with your SIP investments? Do you want to save for retirement, a child's education, or a down payment on a house? Having clear financial goals will help you stay motivated and on track with your investments.
• Rebalance your portfolio regularly: As your financial goals change, you may need to rebalance your portfolio. This means adjusting the allocation of your investments to ensure that your portfolio is still aligned with your goals.
• Review your investments periodically: It is important to review your investments periodically to make sure that they are still on track. This is especially important if the market conditions have changed significantly since you started your SIP.

The rapid growing Indian economy has contributed to significant improvements in salary packages across various sectors. Higher disposable incomes, along with a growing awareness & financial literacy, have empowered individuals to explore investment avenues beyond traditional savings products.

Today, the dream of becoming a crorepati is no longer restricted to game show or extraordinary luck. It has become an achievable goal through disciplined saving and astute investing. Mutual funds are a pool of diversified portfolio managed by experts, reducing the burden of individual stock selection and market timing.

As we look back to the early days of KBC, it's evident that the definition of making a fortune in India has evolved. While hardwork and luck still play a role, financial literacy and disciplined investing have emerged as the bedrock of long-term wealth creation.

While concluding I would like to reiterate that KBC may continue to entertain and inspire us, but the real game-changer in wealth creation lies in harnessing the power of mutual funds and SIPs. The dream of becoming a crorepati is no longer a distant dream but a tangible reality within reach for those willing to embark on the journey of financial empowerment.